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WA eyes royalty relief for iron ore miners

Western Australia may give producers of magnetite iron ore a concession on royalty rates in a bid to jumpstart projects stalled by a recent slump in the steel-making raw material, Premier Colin Barnett says.

Magnetite ore is a low grade that requires expensive processing before being exported, making such projects much harder to justify, compared with the ore produced by giants Rio Tinto and BHP Billiton.

Mr Barnett said WA, which produces nearly all of Australia's iron ore, would consider lower royalty rates in the start-up phase of magnetite projects, but the plan still needed to be approved.

"We will sit down with each of the iron ore producers and discuss with them and provide a royalty concession through the initial start-up stages," Mr Barnett told a conference in Perth.

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At $US120 a tonne, iron ore prices have recovered from a slump in September to a three-year low below $US87, but are down almost 13 per cent this year, after a loss of more than 18 per cent last year.

Development of Western Australia's magnetite projects is key to spurring development of the $5.9-billion Oakajee Port and Rail project, which Japan's Mitsubishi Corp put on ice two weeks ago after failing to find a partner, despite talks with Chinese companies.

Mr Barnett, who faces re-election next March, has long flagged the development of Oakajee as a new industrial hub as one of his top priorities.

"It's a big day for magnetite because for the premier to announce that there will be a blanket concession rate for start-up projects, it is really going to help with investment attraction," said Megan Anwyl, executive director of mining industry body the Magnetite Network.

"The premier has made it clear that the state government wants to get behind the magnetite industry," Ms Anwyl said.

Mr Barnett said senior government officials agreed they wanted to show financial support during the expensive start-up stages for magnetite projects.

A royalty concession would benefit Citic Pacific's $8-billion Sino-Iron project, which is on the verge of starting up, two years behind schedule, and Gindalbie Metals, which recently started commissioning at its Karara iron ore project, co-owned with China's Angang Steel.

The state wanted to send a signal to China and Japan that it was not going to tax the magnetite industry out of existence, Mr Barnett said.

"We're going to do exactly the opposite and we're going to lower royalty rates during those start up years to give a positive endorsement and to see this industry get underway," he said. His office declined further comment on the measure.